TOKYO -- Demand for new vehicles in Japan is set to inch up next business year despite a wobbly global economy, but smaller cars will show the fastest growth as drivers tighten their purse strings, an industry group said on Thursday.

Overall demand for cars, trucks and buses is expected to rise 0.4 percent in the year starting April 1 to 5.85 million units, the Japan Automobile Manufacturers Association (JAMA) said.

The slight rise, however, comes off a low base this business year, when auto sales excluding 660cc minivehicles are estimated to have barely crossed the four-million-unit mark.

The forecast for next year also does not take into account any sharp drop in demand that analysts say could follow in the unlikely event of a prolonged conflict in Iraq, or complications in the aftermath of the war.

U.S.-led attacks on Iraq began earlier on Thursday.

"We will have to monitor the situation in Iraq closely to see what kind of effect it has on demand, but we're hoping that many customers will replace cars bought about 10 years ago during the bubble economy," a spokesman at Toyota Motor Corp. said.

Sales of passenger minivehicles, which typically cost less than one million yen ($8,315), are expected to grow 1.5 percent.

"Although there are worries about a slow recovery in the U.S. economy and conditions in Japan's stock market...consumer spending seems to have hit bottom, and the continued introduction of new models is expected to spur buying," JAMA said.

Most Japanese auto makers expect record profits in the business year to March but with little contribution from the home market, since they make most of their money in North America.

Overall demand for trucks is seen falling 1.2 percent to 1.3 million units, but sales of full-sized trucks are expected to jump 17.3 percent sparked mainly by the introduction of stricter emissions regulations that take effect in October.